President Ronald Reagan’s Former Director of the Office of Management David Stockman has told CNBC’s Futures Now in an interview that investors in the cryptocurrency market are “stupid speculators” and will suffer a “spectacular crash.”
“It’s basically a class of really stupid speculators who have convinced themselves that trees grow to the sky. It will burn out in a spectacular crash. All of these latter-day speculators will have their hands burned to a crisp, and they will learn the proper lesson.”
Over the past few months, Stockman has also expressed his bearish stance on the global stock market and predicted a “gigantic, horrendous storm” to hit stocks. Essentially, Stockman has predicted literally every asset and cryptocurrency in the global market to fall in value in an indefinite period, making his prediction and argument significantly weak.
Economists like Stockman and Paul Krugman have continuously failed to provide compelling arguments as to why investment in the cryptocurrency market and crypto assets such as Bitcoin and Ethereum are “stupid.” Stockman and Krugman have stated that Bitcoin is a bubble and that cryptocurrencies do not have underlying value or intrinsic value.
However, as Billionaire Investor Mark Cuban explained, the lack of intrinsic value is true for any asset and currency in the market. Even fiat currencies that are fully controlled by governments in terms of supply and circulation also do not have intrinsic value, as their valuation depends on the market and the demand from investors. If businesses, individuals and investors decide not to utilize the US dollar, its value will also inevitably fall.
At the Vanity Fair New Establishment Summit 2017, Cuban noted:
“It is interesting because there are a lot of assets which their value is just based on supply and demand. Most stocks, there is no intrinsic value because you have no true ownership rights and no voting rights. You just have the ability to buy and sell those stocks. Bitcoin is the same thing. Its value is based on supply demand. I have bought some through an ETN based on a Swedish exchange.”
It is relatively easy to condemn an asset class or a particular stock with basic arguments like the lack of intrinsic value and speculation in the market. But, it is difficult to provide specific reasons as to why assets are overvalued and are caught up in short-term bubbles.
Moreover, it is not possible to generalize investors in the cryptocurrency market as speculators. Many investors in the cryptocurrency market could understand the technology behind decentralized currencies like Bitcoin and their potential to challenge multi-trillion markets like the offshore banking and gold markets, which is sufficient to justify their investment in the sector.
Cryptocurrencies are not bubbles
While it is possible for Bitcoin and cryptocurrencies to experience short-term bubbles, cryptocurrencies in general are not bubbles. The cryptocurrency market is one of the liquid markets in the world and Bitcoin, the most valuable cryptocurrency in the market, is already more liquid than the most liquid stock on earth in Apple, with a $12 bln daily trading volume.
Cryptocurrencies also experience major corrections several times a month, and their values fall by nearly 30 percent on a regular basis, before recovering. Corrections prevent short-term bubbles from forming, as speculators drop off and the market solidifies.
This pattern will repeat all the way to Bitcoin $100,000 and beyond… pic.twitter.com/o9Wj4reBtv
— Max Keiser (@maxkeiser) June 2, 2017
Stockman also claimed that cryptocurrencies are not real money because transactions are not stable. Transactions on leading public Blockchains like Bitcoin, Ethereum and Litecoin are processed on a stable network with a well-structured fee system and consensus protocol algorithm.
“I have no idea. I mean it could double or triple from here or it could fall to zero. But the point is that it’s not real money because real money for transactions has to be stable,” Stockman added.
This article was curated from Google News. You can read the original article here.